IT Enabled Organizational Agility and Firm Performance: Evidence from Chinese Firms

Abstract

Abstract:In this study, we examine the role of information technology (IT) in improving organizational agility and firm performance from the perspectives of the resource-picking and capability-building mechanisms of rent creation, and the hierarchy of dynamic capabilities. We divide IT capabilities into IT exploration capability, which corresponds to the resource-picking phase, and IT exploitation capability, which corresponds to the capability-building phase. Based on the concept of a hierarchy of dynamic capabilities, we establish the theoretical links between lower order capabilities (IT exploitation), higher order capabilities (organizational agility), and performance. Using the partial least squares (PLS) structural equation modeling approach, we empirically test the proposed relationships using data from 289 manufacturers in the Pearl River Delta region of Guangdong, China. Our results suggest that 1) IT exploration capability (resource picking) affects IT exploitation capability (capability building); 2) IT exploitation capability has positive effects on customer, operational, and partner agilities (higher order of capabilities); and 3) the IT enabled organizational agilities positively affect firm performance. We discuss the theoretical and practical implications of our findings and the opportunities for future research.

The Role of Information Technology in Business Agility: Systematic Literature Review

“…IT capabilities are defined as the ability to mobilize and deploy IT-based resources, improve business strategies, work processes (Mikalef & Pateli, 2017). Provide the ability to understand the characteristics of incoming signals from the internal and external environment, filter raw signals into actionable information, and lastly to respond promptly (Mao & Quan, 2015). There is also research that says that today's technology, namely cloud computing and big data analytics, can guard organizations to stay competitive due to its quick response to the market disruption, effective strategy execution, and beneficial business outcome, to maintain a leading position.…”

The effect of ICT and higher-order capabilities on the performance of Ibero-American SMEs

“…From this point of view, a significant volume of studies consider ICT capabilities to be lower-order capabilities that can influence value creation in firms, not by their own action or in isolation but through capabilities of greater complexity (Melville et al 2004 ; Mao and Quan 2015 ; Felipe et al 2020 ). Information systems experts call this phenomenon the mediation hypothesis (Benitez-Amado and Walczuch 2012 ).…”

“…The literature suggests in this sense that the impact of lower-order capabilities on the performance of firms is indirect and that they need other, more complex capabilities to achieve this effect (Felipe et al 2020 ). In this sense, ICT has been widely recognized as a lower-order capability with significant potential to catalyze other, more complex capabilities (Mao and Quan 2015 ; Felipe et al 2020 ). This implies that ICT capabilities can have an important impact on firm performance but only through other higher-order capabilities.…”

Reviewing the literature in the IS field: Two bibliometric techniques to guide readings and help the interpretation of the literature

“…IT resources and capabilities improve the performance of the firm and its ability to create business value (Cao, Wiengarten and Humphrey, 2011), and they reinforce its competitive advantage (April, Shockley and Peters, 2009;Wang, Liang, Zhong, Xue and Xiao, 2012). Moreover, IT capabilities facilitate the performance of IT decision-making (Prasad, Heales and Green, 2010) and foster organizational agility (Mao and Quan, 2015). Conversely, strategic alignment also creates value since it creates specific competences (Reynolds and Yetton, 2015).…”